International-Financial-Management---Bekaert-2e---Solutions---Ch19 (1)Word文档下载推荐.doc
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ManagingNetWorkingCapital
Chapter 19
ManagingNetWorkingCapital
QUESTIONS
1.Whatisnetworkingcapital?
Whyshoulditbeconsideredaninvestmentthatafirmmustmaketoincreaseitsfutureprofitability?
Answer:
Everycorporationmaintainsastockofcurrentassetsandcurrentliabilitiestobuffertheinflowsandoutflowsofcashgeneratedbythefirm’sbusiness.Thetermworkingcapitalreferstothestockofcurrentassetsconsistingofcash,marketablesecurities,accountsreceivable,andinventoriesheldbyafirmatanypointintime.Bysubtractingthevalueofafirm’scurrentliabilities,whicharethecorporation’sshort-termdebtsanditsaccountspayable,fromitsstockofworkingcapital,wearriveatitsnetworkingcapital.Totheextentthatafirmcanbemanagedwithasmallerstockofnetworkingcapital,cashcanbepaidtoshareholders.Thus,onegoalofmanagementistorunacorporationefficientlyinordertominimizetheneedfornetworkingcapital.
Increasesinnetworkingcapitalareinvestmentsthatafirmmakestoproducecashinthefuturebecausetheyusecashthatcouldotherwisebedistributedtoshareholders.Ifthecashthatisinvestedinnetworkingcapitaldoesnotearntheweightedaveragecostofcapital,itshouldbepaidtothefirm’sinvestors.
2.Whatdistinguishesinternationalcashmanagementfrompurelydomesticcashmanagement?
Inparticular,whatconstraintsariseintheinternationalenvironment?
Thegoalsofaninternationalmoneymanagerofamultinationalcorporationare
(1)toestablishcontroloverthecashresourcesoftheorganization,
(2)toinvestexcessshort-termfundsinanoptimalway,and(3)toobtainshort-termfinancingatthelowestcost.Establishingcontroloverthecashresourcesofanorganizationnecessitatescreatingareportingsystemthatprovidestimelyandaccurateinformation.Whentheinformationisavailable,theinternationalcashmanagercantrytoimproveuponthecashdisbursementstoandcollectionsfromitsforeignaffiliates.Bysynchronizingtheflowsoffunds,theinternationalcashmanagercanlowerthecostofmovingfundsamongthem.Thesegoalsarenodifferentthanthoseofapurelydomesticcashmanagerwhotransfersmoneyfromoneaccounttoanother(orfromonesubsidiarytoanother)sothatthefirmhasanoptimalamountofworkingcapital.However,thereareconstraintsoninternationalcashmanagementthatdomesticmanagersdonotface.Theseconstraintsincludegovernmentrestrictionsonthetransfersoffunds,taxesthatdependonthetypeoffundtransfer,transactioncostsintheforeignexchangemarket,andproblemsmaintainingtheliquidityofallforeignaffiliates.
3.Whyisitimportantforaforeignaffiliatetohaveawell-defineddividendpolicyforrepatriatingprofitstoitsparentcorporation?
Itisoftenadvantageousforamultinationalcorporationtohaveanestablisheddividendpolicythatitcaneasilydefendifgovernmentofficialsofthehostcountryquestionittoavoidproblemsrepatriatingprofitsfromabroad.Withoutsuchapolicyorahistoryofdividendpayments,anMNCmayhavedifficultyexplainingthereasonforanygivenyear’sdividendpayment.
Ifthehostcountryishavingdifficultyfinancingitsbalanceofpayments,itmayappeartothegovernmentthattheMNC’sdividendpaymentisactuallyanattemptbythecompanytoexportcapitalfromthecountryinatimeofcrisis.Evenifagovernmentblocksthedividendsandnotransferscanbemade,manyfirmsfindittotheiradvantagetoatleastdeclareadividendinordertoestablishitsvalidityincasethegovernmentlaterrelaxesitsforeignexchangerestrictions.
Somecorporationsalsoseta“common”dividendrepatriationrateforalltheirforeignaffiliatesindifferentcountries.Thisapproachestablishesthattheshareholdersoftheparentcorporationdemandacertainshareoftheearningsofallofthecorporation’sforeignsubsidiariesandarenotmerelytryingtotakecapitaloutofoneparticularcountry.
4.Whatisthedifferencebetweenaroyaltyandafee?
Royaltiesarepaymentsmadetotheownersofatechnology,apatent,oratrademarkfortheuseofthetechnologyortherighttomanufactureunderthepatentorthetrademark.Assuch,royaltypaymentsarepureprofitsinthesensethatthefirmreceivingthemperformsnocurrentservicesandincursnocurrentcoststoreceivethepayment.Thus,royaltiescanbeasubstantialsourceofincomeforthefirmthatisreceivingthem.
Parentcorporationsalsoassessfeesfortheservicestheyprovidetotheiraffiliates,includingmanagementandtechnicalconsultingservicesandfeestorecoveroverheadcostsassociatedwithday-to-dayoperationstheparentperformsfortheforeignaffiliate.Thesecostsincludetheforeignaffiliate’sshareoftheresearchanddevelopme